Investor Relations best practices for Founders with Pekka Viilto of Rundit

Alright, and we're live. Welcome to this edition of the July Founder Institute Alumni Master Session. I'm really, really happy to be joined today by Pekka, who's not only a very experienced entrepreneur, but also can— has a lot of expertise on kind of how to keep all of your stakeholders aligned with helping your business grow. Over time. So we're going to be covering a lot of that today, and we're also going to be covering any sort of questions that come up. Now, just quick housekeeping here for everyone before, you know, Pekka introduces himself. We like to have these conversations to be very, very interactive. So if this is your first time joining one of these master sessions, you can see on the right-hand side of your screen that you have, you know, basically a chat room, right? And in that chat room, you can go ahead and ask me questions and I'll go ahead and relay them over to Pekka. So with that being said, Pekka, really appreciate you taking the time out of your busy schedule to really educate our audience on all things of how to activate your network essentially around you and on any sort of investor relations knowledge. So with that being said, would you mind giving us a quick introduction about you and then we can get started with the presentation?

Yeah, thanks a lot, Mike.

Yeah, greetings from Amsterdam. So you guys, most of you are maybe based in the US, so my schedule is not that busy anymore at this time of the evening. So it's 6 o'clock here now in Amsterdam. So thanks for having me. Definitely.

Thanks, Mike.

No problem. This is a global audience, so everybody here is all over the world. So that's one of the neat things about FI.

So yeah, true that. Yeah, sorry about that. Yeah. Okay.

Uh, yeah, yeah. Just to, um, um, maybe I'll introduce myself in the beginning.

So, um, my name is, yeah, my name is Teck Kavil.

I'm a co-founder of, uh, investor reporting and investor communication platform called Rundit.

And I'm an entrepreneur since, I don't know, like basically I think quite exactly like 20 years, since 20 years now. So in 20 years there has obviously, there has happened quite a bit and I'm here to share the knowledge that I have gathered in that 20 years and more focusing on the negative sides also, negative experiences and what I have learned during these 20 years. So hopefully you guys, you will like it.

And like Mike said, this should be as interactive as possible, meaning that ask the questions and tell me that, okay, we want to hear about these things and share me more about this.

So I will try to answer all your questions.

Awesome, awesome. And I think you have a presentation ready for the audience as well.

Yes, so let's go, let's go to the presentation.

So just a sec, and there we go. And can you see me there?

Yes, and I also recommend that you turn your webcam off, this way we can see the entire deck.

Okay, just a sec then.

Right next to the microphone button, there's basically a— there you go, perfect.

Okay, great. So you don't— I got that, so you don't want to see my face, so thanks about that.

Okay, yeah, so the whole idea of this presentation is that I will tell first a little bit of my history So meaning that sharing the expertise that what is that I have, what has happened during me, what has happened to me during this my, let's say, startup career. So meaning that what has happened and if I would have known this that I'm going to share with you today, I would say that I would definitely be a millionaire. So let's start with this, my history. So once upon a time, so meaning that what What I have done in the beginning, we all entrepreneurs, we come from different backgrounds. So meaning that, for example, I graduated to be a hairdresser. This was like exactly 20 years ago. So it was like '98, '99, I guess, was that I graduated to be a hairdresser. I did quite well. So I was one of the leading— I could say that I was one of the leading hairdressers in Finland. And going through around Northern Europe and educating the other hairdressers how to cut hair, how to be a better hairdresser, and I did all the shows as well. Then I got bored with the hairdressing, I got into the real estate business, so meaning that I was selling apartments, I was selling bigger real estate, I got into the real estate investment, and then I founded after that I founded my first startup, which was— this is in Finnish, so most of you don't understand maybe so much of Finnish, but this is "Ela ma makusta isan entia." This is a real estate management company. So meaning that we were trying to create a new concept for real estate managers. This was my first startup and I lost basically all my money on it. And to be honest, I'm still paying those debts. So I got a couple bank loans since that, that I basically, yeah, I used all my money on it. Then the next startup, because obviously this one didn't work because it was the first one. So often the first startups, even though those ideas can be good, they don't work. So my next startup was a company called SkinLab. We were like a platform, global platform for gaming developers. So we had this curated list of gaming developer professionals around the world. This was the first one where we raised funding actually. So I think altogether in euros we raised like €550K. What we were lacking was actually the sales. So we created this beautiful platform and actually found these developers around the world but never succeeded on the sales. But we had the first investors there, so €550K and maybe around 20 investors there. Then the next startup, because the previous one didn't— again, didn't work. So the next one was a company called List71. We registered this peer-to-peer lending platform to Singapore actually. There we raised €850,000, €850K, and we had like, I don't know, maybe 50 or 60 investors. And again, never succeeded on the actual business. What was funny in this whole thing was that all these investors actually which we had, they could have been also funding these companies that we were raising funding for. But what happened was that we didn't have any communication between the investors. And also in the previous company, in this Schindler company, we didn't have any communication between the investors. Between our investors and we used quite a bit of time for finding these perfect investors for us, so everybody speaks all about wise money and we actually had wise money there, but never succeeded to use it and all because of the attitude, the attitude that we had for this, our, for these companies that we we raised the funding for, the attitude in this whole process was that fuck you investors, that our thing is like, it's gonna be one of the best in the world and it's gonna be even that we do zero revenue at the moment, next year we're gonna do 5 million, then we're gonna do 10 million and then we're gonna do 50 million and then somebody comes and, Google comes and buys us off and then you investors, then you will have your exit. And this is all like way of thinking, it's really, well, for start it's really bad for the business, but it's also, it's really bad for your future in the sense that if your attitude is all the time like that, that the investors, that meaning of the investor is that they will give you the money and then they will just wait. Even that you would have the perfect investors and still you think that the investors are there just to give you money and to do nothing else. So when I found out that, okay, none of these investors actually, they don't really like me anymore, so meaning that I would say that none of these investors, maybe they don't hate me, but but they won't, they won't definitely, they won't invest to any of my new ventures. So what it has created is that because I didn't listen to them, I didn't inform them, they just don't basically, they just don't simply as it is that they don't just like me anymore. So this is one of the reasons why we found this new company, so Roundit which is exactly focusing on this issue and to solve these issues that I had in my previous companies. So what Rundit is, we are like a centralized reporting platform for the companies so that the companies can centralize and standardize their investor reporting. Meaning that all of your investors and stakeholders can be at the same place. So VCs, angels, accelerators, maybe banks, whatnot. So that you can centralize your investor reporting and share your key metrics and do your updates as easy as possible. And on the other hand, for the VCs and for the other investors, that they have all their portfolio in one place. So when the company is informing the— or doing the reporting and communication for the— for the investors, everybody are always up to date. So if the company needs some help, they are there to help you. And if there is something that they need to react, they know where the company is going and they are able to react. We founded this company, or we launched this, let's say, beta version of the tool about a year ago. Since that, we have, well, we are Finnish-based company, so we have like Almost all of the Finnish VCs are using us. Internationally, there's 100+ VCs using us. And also in the Nordics, we have this company called— the banks called Nordea and Danske Bank. So they are using us as well as institutional investors just to serve their own startup companies that they are funding, just to serve them better. So what is the problem that we are Solving. So what is the actual thing that we want to solve and why this problem exists? And let's change first this definition that everybody are talking always about investor reporting, but I prefer much more to use the term or the definition investor communication. Because, well, you know that everybody hates reporting, but everybody loves communication, right? So it's like, um, so when we change the definition of investor reporting, that it's more communication, it brings that if there would be more communication between the founders and investors, there would be much less need for reporting. And this actually is true. So if there would be more communication, why somebody would need any reporting, at least the private investors and so on, that they are more there to help you. And the hard fact is that majority of the investors, they have very little knowledge of their whole portfolio, that how the portfolio is performing. And this is actually true. So if you ask from the investors, especially the VCs who's got bigger portfolios, Everybody will say that, yeah, yeah, of course we know what's happening in the companies. But you know that the VCs, how they do their reporting is that these companies, it might be that the VC has got 200 companies in their portfolio and everybody are sending them quarterly or monthly or annually, they are sending these Excel spreadsheets which tells that what's actually going on in the company. So you can imagine that when the investor reads all these Excel spreadsheets, they have actually not so much clue what's actually happening in the company. Of course, in many cases, the VCs especially, they are sitting on the board and they hear much more than what's in the written report. But let's go into that a bit later. And why are the investors so uninformed? And why the companies, why they hate so much of reporting? Well, it's more about the tradition. So like, there hasn't been that much transparency between the companies and the investors. And that there hasn't been any standardized model of reporting. And not even that there would be a standardized way of doing reporting, meaning that what tools they use for the reporting. So that there's emails, there's Dropbox, Google Drives, Excels, different kind of Google Sheets, whatever, whatnot. And what it means is that because there is no standardization in the business and in the reporting, So everybody are always thinking that, okay, what should I report? What are the things that we need to actually report and what it actually means? And like what I told in the beginning of my own background is that I don't have any experience of investor reporting whatsoever. So I have learned this investor reporting with my own experience, and that experience has been That has cost me and then the investors also at the same time shitloads of money because I just didn't have any practicalities and I didn't have any experience on this and we, like you know, all you listeners who are in there, if you think about yourself, you all come from different backgrounds and it might be that nobody has actually taught you what it actually means to do investor relations. Supporting. And what is important to remember is that fundraising is ongoing process. So meaning that it might be that you guys, you are first-time entrepreneurs and you are just preparing your first— to your first investment round. And so get your stuff in order already when you are preparing yourself for the next, for the first investment round. And when you have raised your first funding round, don't be like me that then you just forget your investors. Prepare yourself again for the coming rounds. So meaning that, okay, you are raising now let's say half a million and one year forward you need to raise the next 1 million or next 2 million. And what is important in here is that when it's ongoing process, for sure it makes sense that your previous investors, that they know what's been going on in the company during this time. For example, our case now, when we launched this round, was that we actually did totally different stuff in the beginning, which was related to funding. So we were doing investments ourselves, we were doing loans for the growth companies, so I was acting as an investor there. And so we raised the first funding round from our investors, it was— this was like 3 years ago or something. And so we did need to do a huge amount of sales, of course. This was our first funding round for this company, and we convinced these few angels that, okay, they will invest the first time, and they invested there. Altogether, they left around maybe €200,000. Then again, after less than a year, we ran out of money. We needed to sell them again. That, okay, we haven't been so successful during this year yet, so we didn't get into the— we didn't get to the numbers that we were expected to get, so meaning revenue-wise, so we needed of course more money. And again, they invested, the same investors actually, so they trusted us. And then on the next funding round, which was about a year ago, we had pivoted out totally from the previous business and we had had them in a pilot of this reporting platform. So we had this, like, let's say, call it as a mock-up version, so that these investors, they were already able to follow us, what's happening in the company. And then about a year ago When we raised again, we just called to these investors and what did they say? Oh yeah, of course we're going to invest. Oh no, this starts to look like a business, so this is going to be something actually. So the message of this is that when you keep your investors all the time informed, like we did monthly, so they were all the time following us and they were able to follow our progress, and of course, at the same time, they started to trust us because we didn't need to sell them anymore that much. So, who are you reporting to and why? Angel investors. Well, who are the angel investors? They are normally investing their own money And why is this important? Well, they often want to help you. It might be that they come from the backgrounds that they have— they've been already really experienced entrepreneurs, they have done their career at some— somewhere, and now you have this all knowledge for— in your use, and they want to share it. So it's important. So remember this and use this. And, well, the angel investors, they often complain that they don't hear anything of the companies. And normally they maybe hear about the company when the company runs out of money. But then the entrepreneur calls them and tells them that, okay, we are running out of money next month, would you like to invest again or maybe give us a loan? And so how can you use this, your network, if you don't communicate with them? So use them, and they are there to help you. They actually do. Of course, there are investors who are just doing it as a hobby, and it might be that they don't want to even contribute, but that's a different case. And remember that when this raising funding, it's ongoing process. The private investors often work in groups, so if the— when there comes the next funding round, if you have taken good care of the investor, they will also introduce you to the other investors. Then the VCs. Well, why do the VCs— why do they need the reporting? Well, they are not generally— they are not investing their own money. Meaning that they have their investors as well. So they are called— those investors are called LPs. Do you know what that is? It's a limited partner. So meaning that there is— it might be that there's all 3 private individuals who has invested to this fund, or there might be some pension funds who has invested to these funds. Those are often called fund of funds. And So these investors, when they are investing to you, then these investors, they knew if you didn't need to do the reporting for the VC, then the VC needs to do the reporting for the LPs. In Europe, often, most often, this happens quarterly. So they, you need to do the reporting quarterly, and then the VC needs to do the reporting quarterly for their LPs. And this affects also, of course, for their next funds fundraising. And what about else? What are the other things that the VCs can do? What they can help you with? Is that, well, if they are experienced VCs and they have a huge portfolio of companies, they have seen so many patterns in the portfolio companies which which like that everybody fail on the same thing. So they actually pretty good to give you advices that you wouldn't be the one who fails again with this certain topic. And what they can help you with, what are the other things? Well, public relations, so PR, of course they are advertising their portfolio companies because that gets them more famous as well. And the VCs, they want to be famous as well, so they want to brag with your accomplishments. So they are doing PR for you. And this, of course, affects on doing recruitments and making you more connections or creating you more connections. And also, what you need to remember is that VCs actually, they raise funding rounds for you guys as well. So meaning that, so when your company is raising the next round, the VCs are contacting the other VCs that, okay, we are going to invest $500,000, would you like to invest another $500,000 or $1 million or whatever? So depending for the VCs how big they are, in which stage they have invested to you, Then the follow-on investments, it might be that they do a small follow-on investment and then they are inviting all the other VCs also to join. And why this is important is that of course the VC wants to, if they can't participate in all your coming rounds, they want you to meet these or they want other VCs to invest to you as well, just to make sure that your funding is in place next year as well. And then there comes accelerators. Well, these accelerators, so their job is to teach and help companies. So I don't know, how could they help if they have no clue what's happening in the company? And we have to remember that also these accelerators, when they are investing to you, that if they have equity stake in your company, they are doing for sure, they are doing their LP reporting as well. So they are not just asking your KPIs and your metrics and written reports and stuff like that. They don't ask it because they just want to, they just want you to do it. They have some reason for that, and LP reporting is one of the, of course, one of the most important reasons, or one of the biggest reasons. And also we need to remember that often these accelerators, well, we are now having this webinar for one of the biggest or the biggest, so they have huge networks. So you better use that network or you should use that network. So what, what do we need to report? So if you don't know how your companies are doing, you are not investing, you are gambling. So this is more towards the investors, of course, but you have to also remember that as a founder, that if you are a founder, it means that you want to secure also your investors' investment in a way that you are opening them the whole whole project and you are actually telling them that where they are investing because, okay, that affects the investor's investment but also at the same time more the investor knows about you the better because then they can help you. So agree with your investors what they want you to report. Of what they expect you to report. And this is actually important. I've been teaching quite a bit of angel investors. So often these angel investors, they are saying that we don't hear anything about our companies. Well, my question for them is that, okay, have you told to or have you discussed with your companies that what you what you would like to hear. Not only that you need to know as a founder what you need to report for your investor, but also ask that from your investor, what would they like to hear. I warn you now, the following slides which are coming now include a bit of product placement, so don't be offended. So I'm actually showing now some things from our tool that how we think about this, that what would ease your reporting. So agree with the standard model and template with your investors. This helps you and also of course them, that when you get the structured model and you know that what are the things that you want to share exactly with this investor. And so that helps you and it helps them. When we have the structure for anything that we are doing, it actually makes it much more effective. So not just that we every time we think that, okay, what are the things that we should share and what should we tell. So in our tool, in Rundit, you can group your investors. Are your stakeholders. So you can have, for example, VCs, angels, maybe prospect investors, board, accelerator, and you can decide in the metrics level that what are the things that you want to share for this particular investor group. So it's super easy. Then you can decide that, okay, for the VCs, maybe I open them everything, and it might be that, for example, some small accelerator somewhere I don't want to show them cash balance. Or for the crowdfunding investors, that if you have all the crowdfunding companies there, that maybe you don't want to show them at all these like financial metrics. So what should I report? So okay, the metrics part, that's the whole— that's one thing that you need to report. And then you have this written part of the report. In many of the cases when we are talking about pre-revenue companies, so that you are early-stage founder or early-stage company, it might be that you are totally in the pre-revenue stage. So meaning that you don't have any revenue, and so actually the written part of the report can be much more important than the actual metrics part. In most of the cases, the early-stage investors, they are mostly interested in your cash balance, your cost, and which equals basically what comes to runway. So meaning that basically how much you got lifetime before you die. So that they just know that, okay, we need to be prepared that that this company will call us in a minute or next month and ask us more money. Or they can contact you guys and tell you that, okay, do you actually know, Mr. Founder or Mrs., that you are actually running out of money? And this is actually something that what we have learned now a lot is that the investors, they need to also tease the founders quite a bit. do you guys actually know that you are running out of money soon? So either you raise more or you better start to sell. This template here is actually— this is one of the templates that one of the biggest VCs in Finland is using. And since we have had these workshops in Finland for the other VCs, they have started to use this as well. So they are a bit more later stage VC. So they are asking net sales, gross margin, EBITDA, EBIT, net profit or loss, cash balance, headcount, and runway. These are the metrics, these are the simple metrics that everybody asking, or they are asking. So when you have your discussion with your investor Go through that. What are the things that they want to hear? Like, like we spoke earlier, go through what they want to hear. And also, if they are asking, let's say, 20 different metrics or 30 different metrics, and they are asking it monthly, and, and, or they are asking it every 2 weeks, ask them that, okay, why do you need this? Because these metrics which are here or they cover quite nicely the needs of the VC that when they need to do their LP reporting. And often they are sitting already in the board. So try to have this discussion with your investors that why do you need this much just to simplify the reporting. What has happened already in Finland is actually now when we started this project around 2 years ago was that when we started to interview these VCs and we found out that, okay, one VC is asking this much and let's say 10 metrics and then the other VC is asking 50 metrics. And this VC who asked 50 metrics, they think that they are light with their reporting. Well, now when we started to go back and forward with those people, they started to ask that, okay, what are the other VCs, what they are using, or what are the metrics that they are asking. So what we have managed to do now is that we have managed to simplify the reporting a lot so that there is already now more like standardized model that everybody are using. And to help the company, that's the main thing here, is that the life of the company gets easier and easier all the time. This is a template of one accelerator here in the Netherlands. So what they are interested in is that when they are investing in early, early-stage companies, there's product already in place, but what they are interested in is the acquisition, acquisition rate, revenue, MRR, so monthly recovering revenue, referrals, uh, churn rate, and average revenue per user. These are— this is the simple template that they are— those guys are using. And okay, so I've been talking about this, why the investors, why they need the reporting. It's this. So these investors, they need to have the data to actually follow the portfolio like the performance of the portfolio. So how, what are the investment amounts? Of course, these are the one thing that they are managing, but also that they can calculate their revenue, their IRR, and so their profits. And so what it means is that they have to manage this all the time and to know what is happening in their portfolio when they are doing their LP reporting, so for their own investor reporting. So then they can get this proper idea, proper overview of their portfolio's performance. So how the investment is performing and also at the same time how the companies are actually doing. That okay, this Rundit company is doing like this and Smartify company is doing actually much better. So maybe we should invest to this Smartify company more. So meaning that they can actually follow these companies and because you can imagine that if the investor has invested to let's say 100 companies, they are not focusing their time as much to each one of these companies as the others. So they have their favorites. And some of these companies are the ones which is going to lose. So they are not going to make it. They are not going to do proper exits.

It might be that they can get bankrupt.

So these investors, when you guys, when you are reporting for them, try to convince them in a way that be open as possible for the investors that they they will understand that, okay, these guys are doing their work and they are actually— what they are doing is right things. But also in the way that when you tell the negative things of your performance, it creates trust. They understand, these investors, they understand that these guys, they are learning all the time so that they are doing their mistakes but also at the same time they are telling for us that, okay, we did this mistake, but next month we're going to focus on the other stuff because that will get us maybe to the point where we want to be. So you know that when you talk for some people that this is what I have learned, that creates trust. But if you are hiding these things, these negative things, nobody believes that everything has went well, especially if the numbers, if they show something else. So where does this everything affect? Okay, you need to do post-investment investor reporting, but where this affects is fundraising, of course. Talk to the right investors and build the relationship. My job in our company is to do the fundraising, so I'm the one who is talking to the investors all the time, keeping the relationship, the existing relationship with the investors, and also of course finding the new investors. Even that we wouldn't be raising, I try to build up my network all the time in in that space. And we have been lucky with our investors that they've been investing to us in every round. And actually now when we are raising again, these investors, they will follow now again. So, and we have chosen our investors that those, all of them are angels and not VCs. And why is this? Is that we could talk to VCs, well, for start, we are selling for the VCs, so we don't want to mix up that with that, but we are also, we have decided that okay, this round still, this is going to be an angel round because we are raising up to €1 million, so it's doable for the angels and we need also, we need more competence. Around us. So meaning that we need these people who can actually contribute to our business as well. And so do your due diligence. What that means is that when either it's VC or it's angel investor, try to understand that who is this person or which is, what is that fund. What is the industry where they are focusing, if they are? What is the ticket size? What is the average ticket? And ask this if you don't know. So this is a good question from the investor that, okay, we are raising €100,000, and what is your ticket size? And if the investor says that my minimum ticket is €500K, so then you already know that this investor is not the right investor for you. And it doesn't mean that there's something wrong with your company, but what it means is that it's just not the right investor. So do your due diligence of the investor. Investors are doing due diligence of you, but you have to do also your homework when you talk to these people. Because fundraising, it's exactly the same thing as any other sales, that you have to do your homework, that you know who you are talking to. That when you are talking to some customer, if you are trying to sell them something that they don't need, well, there's not going to be a deal. So you can't convince some VC or convince some investor that you need to invest in my company. No, they don't need to. You need to understand that. And also when it comes to Angels, that when you do the due diligence, one of the main things is that what kind of angel this is. That are they investing as a hobby or are they trying to achieve the revenue or the profits? Because VCs, those are, they are only focusing on profits. And they don't do something that, okay, we are building this nice business here. They are not interested in some nice things. They are there to profit. You get my point. And what is important is that VCs don't risk both business model and team, meaning that you need to have at least one of those in place. So it might be that you are lacking something in your business model But when the team is good, for example us, we, the team has been always good, so the investors has been investing only to the team and they've been following us even that we've been struggling with our businesses before. And now it seems that it pays off. So when you are meeting these investors, you are, or some of you or most of you are first-time entrepreneurs. So when you are meeting these investors at some events, for example, don't start to pitch them like immediately. And don't hope, don't have high hopes that when you send them some, your pitch deck, that that will bring something. It doesn't. It doesn't normally, it doesn't mean anything. Set up the face-to-face meeting immediately. So it can be that this introduction is a pitch deck, but then the actual storytelling, that you are telling the story of your company and your idea or whatever, that has to be done face-to-face or in the proper call. And what it means that always get the Get first the anchor investor. What does it mean? It means that, well, investors, they, especially the private investors, they work in groups. So that when there has been some other investor, they will— much more bigger chance that they will invest as well. So you need to always have this anchor investor. Send the deck for as many interesting investors as possible. Then pick few best ones and try to get them to invest. So get the anchor investor because then it gets interesting. When you have the anchor investor, you have closed, let's say for example, 20% or even 10% of your whole funding need. But when then, when you start to discuss with the investors, it changes the whole, whole game. So then the other investors, they know that, okay, some other investor has already taken the risk and has validated the whole thing, has validated your business, so, and has validated you. So then it's much easier for the investors that they will follow, or for the new and other investors. And also remember that when you have taken good care of your previous investors, they will— then there's a much better chance that they will follow you all the way and they will be your anchor investor. So what does this previous— has got nothing to do with the investor communication and reporting. Well, everything is all about, it's all about building the relationship, building the trust. And if you remember what was there before, the fundraising never stops, it's an ongoing process. And investor communication actually starts before the investment. So meaning that build the trust, build the trust and and be open for your investors. If you are using Rundit as your investor reporting tool, collect their data, collect it as it would be your diary. And when you open your diary for the, for the investors or for the investor candidates, it's really strong. It looks really strong. It makes you much more credible founder, it makes you much more open in the eyes of these investors, and that will pay off, meaning that if they are not investing to you maybe now, it might be that they are investing to you in the future. So be open, be transparent, be honest. That's one of the main things in this whole thing. Whether it's a pre-investment or it's post-investment, you have to be honest, and the more open you are, it just pays off in the future. So it's like 50,000 times easier to raise funding from the previous investors, and we are a good example of it. So meaning that these, our investors, they've been following us all the time. And they will invest again. And they— and if— and also that they, these old investors, they are always bringing you more contacts. So they are telling you that, okay, we might in the next round, we might put the 1/4, but then you should talk to my— this friend and this friend and this friend. So then we are able to close the whole round. Because it's also good for them, isn't it? So they are bringing the best people that they know, they know your business, they want to help you, and they just all the time think that how could I help this company to get my, of course, most out of it, out of my investment. So valuation of your company is rising, so it's super important. And also when we are talking about the VCs, Did you know that VCs, they already allocate the— in their first investment, they are allocating already the next investment. So meaning that, okay, it might be that they are investing now €100,000 and then they are seeing that, okay, how are these guys doing? And when you show them that we are performing well, then they put €500,000. So they are already allocating funds for their fund, from their fund, that which, what they're gonna use in the future. So now I want to just give you a quick recap of the whole presentation, and then we have a few more minutes' time for the questions. So remember, investor communication is like any other sales. Remember that. Build the trust, get the feedback, and get the audits right. Don't do reporting, do communication. So meaning that metrics are just one part of it and the actual communication is the main thing. Start to build your investor communication already before the investment. So meaning that this is actually a full-time job. So building up the relationships and getting the— preparing yourself and preparing the investors also for the coming rounds. And well, like I said earlier, that investor reports are like diary. When you show that to your coming investors, you become an open and credible founder. That is a really big, big thing that you can— what you can do for the for the investors is that you show them that this is how we've been doing investor reporting before and this is how we're going to treat you guys if you now invest. Go through with your investors that what you— what do they want you to communicate for them. So go through with your investors that you have a certain template that you are always using for your reporting. Then they can come back with their questions if they need to do something but have your reporting standardized. It's really super important whether you use regular something, I don't know, email template, or you are using our tool Rundit for the reporting. Make your own template there and always use that. When you are raising funding, do the investor due diligence. So we just spoke about it. So do learn these investors and do your homework where they are investing, and then you can— then you know how to communicate with them. And networking and building up investor relations is a full-time job, so take it actually seriously. And if you learn this, what we have just spoken this almost an hour, that this will support you the whole entrepreneurial growth for the rest of your life. So meaning that this will support all the coming ventures if the next one maybe doesn't work. So don't be like Pekka, learn your investor communication and do it right from the beginning.

Awesome, that was a terrific talk. Thank you so much for doing this. We already have a bunch of questions that are coming up here in the in the chat room. So I'm going to start with Ricardo. Thanks for posting your questions here. So looks like, you know, Ricardo from Paid Exposure does a really good job with his reports. He basically sends out a monthly update every single time. We read it all the time. Hey, Ricardo, good to see you here. You know, he's asking, is it okay to include information about the conversations that he's having with potential investors. If there are multiple investors, I'm assuming multiple potential investors who are all on the mailing list right now, would you do that? Would you talk about the potential conversation you're having?

Yeah, yeah, I have. Well, of course, if the conversations, if those are positive, that it looks like that the—

it's also, we have to remember that this is like a game, so we also need to play that right.

So if some investor, potential investor, if they are showing the signal and telling that I like you because of this, why not to share that with the other investors as well?

So try to get them like you more and try to get them of course to like the whole funding round more. So when you show for the other investors that all the other investors are interested in investing as well. That helps.

Yeah, you know, our, our, our, our, uh, advice on this one, Ricardo, is like, look, you don't know who knows who, whether they like each other or they don't. And oftentimes investors, some investors don't want to know that they're, they want you to— they're looking at investing or doing diligence on this for various reasons. Okay. And so to play it safe, you're better off actually not disclosing who you're talking to specifically unless the following two things have taken place. Number one, you have got explicit permission from the investor to use their name while you're fundraising. That's number one. Number two, that investor has actually funded you. So they've actually wired the money, right? Because if the money hasn't been wired, then there's still a lot that can go wrong between the wire and them committing to the round. And if they back out, right, then all the other investors are gonna say, well, why this person back out, right? So this kind of creates a lot of risk for you. If you were to name drop. So I wouldn't name drop. If you want to do, if you want to mention some of the high-level things, like Pekka said, that's great. But I wouldn't go XYZ investor said this and they're really looking at investing in our company.

Yeah, because there can be always, there can be a question that, okay, why didn't this guy invest in the end?

So yeah, you have to be really careful with that.

Yeah, I got another question in regards to, two term sheet related questions already. By the way, if everybody has any other questions, feel free feel free to add them in the chat room. So is it common or a good thing for investors to ask for the right of first refusal? And is this something that we should be worried about, that if somebody has refused? It's, you know, he's asking— I'm assuming that, Ricardo, you have like a term sheet, right? And in the term sheet it says that there's like a right of first refusal from the investor, um, and he's asking if that's a good thing.

Well, that can be a good thing. Yeah.

Yeah.

Yeah. Can't be a good thing and can be a bad thing, isn't it?

So yeah, it's, it's, look, it's a good thing for the investor. It's a bad thing for you. So I would remove that clause. Look, right. Right. A first refusal basically means that, you know, let's say you're going to want to do another round. They can say, no, you know, we don't want to do it again. Right. And so you should take that out. That's pretty aggressive term. And we don't really see that. Especially at your stage. So most of the companies here, by the way, are basically pre-seed stage. So we're not seeing that. That's, that's like a pretty aggressive term. So you should definitely take that out. Um, there's another, um, a question here as well. Uh, you know, what is your insight about investors who provide investments based on achieving like milestones, like say on a quarterly basis or anything like that?

Well, I've been actually working really closely here in Amsterdam with one, uh, starting fund now who is investing there. The terms are that they are investing €50,000 now. When you achieve, when you get your product out, they are investing another €200,000. When you get the scale-up, when you are in the scale-up phase, they are investing up to €1 million. So everything is related to the data, how well you are performing and reaching the KPIs. So I kind of like that model. Actually quite a lot. For us, it would have been really bad in the beginning because we've been pivoting our business. But when you are already, you know what your business is all about and you know that you can measure the KPIs, but what you want to reach. So in that sense, also at the same time, you can feel yourself quite secure. So then you have your funding all the time in place that you can, you know, that if I reach to these KPIs, then I will get more funding. So it can be good or bad. For us, it would have been bad, but for many of the companies which are already in the business, it's really good.

Yeah. So if you have a decent, you know, at least a decent outlook on product market fit, a model like this could work. The reality is that most companies at the pre-seed stage just simply don't. And so that actually creates a lot of issues, like, like I said, right? I mean, if you don't get the follow-on investment from that, you know, particular investor because you didn't hit those milestones and you need to go out and raise more money, then actually it puts you in a really tough situation because you basically have to explain that to all the new investors why your current investor is not investing. And as Pepe said, the best way to raise money, especially once you've raised money before, is to raise it from your insiders, from the people that have raised, right? It's a, it's a tricky one. So again, it's, if you have that in your term sheet, a quarterly basis, by the way, is really aggressive, right? That's, that's on, that's like, that's, that's borderline like egregious. Okay. If yearly, that makes a little bit more sense, maybe something like that, right? Um, you know, so that could make sense, but like a, you know, what I would do is, is try to like not have that in, at least in this first stage until you figure things out. Once you actually have a pretty good idea of how revenue comes in and things like that, then that could be could be really interesting, you know. So a couple of— any other questions here? Zorica says that many EU-funded projects do use milestones on a quarterly basis. Yeah, I know a lot of the terms in the EU in general are pretty aggressive, at least compared to kind of what we see here in the United States, where the investors really try to control the companies. And as a result, the companies can't scale at the same level, right? Because it's difficult to scale when you create terms that don't enable the company to scale. So we see a lot of that.

Yeah, that's a quite big difference here in Europe is that we are, or the investors here, they are not so familiar with taking huge risks. So the capital here in Europe, it's much smaller than what you guys have been in US. So meaning that it might be that these, the investors, they start carefully, that they invest, let's say, $500K, and it might be that when you, when the company starts to get the proper market fit and then show the attraction, then they are willing to invest substantially more. But they, it might be that they are already thinking in their head that this will be divided in milestones becoming an investment fund.

Yeah, makes sense.

Yeah.

Um, uh, any, uh, any final questions here? We kind of reached the top of the hour here. Um, we could probably field one or two more questions. Uh, if so, please, please add them into the chat room. One question I had for you, um, you know, we spent a lot of the presentation on, on investors, right? Um, how would you bring in advisors, maybe bring them into Runded, or how do you think about like bringing in advisors or activating the network that you have around you, or along, along with this investor reporting process that you've basically outlined here for us?

Then how would, how would we build—

yeah, how would you think about that? I mean, do you, do you create like a special report, for example, for advisors using like Rundit or any other tool, or do you bring them into those reports? Like, how do you think about that?

Yeah, yeah, we have, we have divided our reporting that it's in the that we have our, you know, they are not capable of contributing that much in our business.

But also, but, and again, the advisory board itself, they are really focused on the, actually, the bringing their contribution to the business.

So we are sharing them some different stuff.

Final question here from Dustin. So people are talking more about social impact startups these days. It's a big initiative here at the Founder Institute as well, of course. How are, you know, the founders and investors— now the questions come in. Awesome. Yeah. You know, how are the founders, how are these founders, investors thinking about like, you know, KPIs, standard metrics for social impact? Is that happening yet?

It is happening.

Yes.

But it's like, let's say that it just started to happen. So that in our case, we are actually bringing those KPIs there now to our tool. But until this point, everything has been with the custom field, like done with the custom fields. But yes, it is more and more raising this topic. And actually in the Europe, More and more the VCs, they have started to share their KPIs related to that topic, like more of thinking of the PR, so that they are actually sharing the KPIs of their portfolio, that how well their portfolio companies are covering that topic.

Got it. All right, I'm going to get one more question in and then we're done. All right, so basically last question is from Joaquin. I hope I said that correctly. You know, he's thinking about raising about $300,000, you know, based on various metrics, active users. You know, I guess if I was to extrapolate what you said here is like, you know, how do you think about like the valuation and how do you basically, he said like the defend it, um, you know, like say like later, later down the line. Is there any kind of tips on that?

Uh, you mean like to—

how about this, how do I, you know, um, how do you basically set evaluation? How do you think about that as a founder?

Yeah, so, so the, the getting, getting the valuation in place, it's also, also about discussing with investors.

So when you are discussing with the investors and then you start to make the deals and some of the investors, they might start to bargain and then you are trying to find the best valuation for them. And it can be that first time when you go to talk to the investors that you are, that okay, I have this PowerPoint thing here and my valuation is 4 million.

It might be that they laugh at you and tell you that, okay, come back when you have something more serious.

So then you have to just get the signals and try to get the valuation in place. So when you are more experienced, then you start to understand that, okay, what the evaluations of the other companies are.

So then you get it in place.

What I recommend that you do is that you email grads@fi.co. That's grads@fi.co. Mark, if you could put that in the chat room. We're opening up funding labs starting next— applications next week where we basically hold your hand through this entire fundraising process and we'll help you through this as well. You know, valuations is kind of like the stock market, right? Like, how does the stock market value Tesla versus other car companies? It's basically supply and demand. If there's demand at that valuation, people will buy your stock at that. If there's not, they won't. It's not like, oh, I get these metrics and if I have these metrics and I multiply them by this and this, then I can set this kind of like valuation. It's very difficult to basically like do it like that, right? It's your local ecosystem, what your current investors within that ecosystem can support, what kind of checks they're willing to write to. And then basically that's how the valuation is set. And we can discuss that further. But, Pekka, look, this was amazing. Thank you so much. For doing this.

This is—

you helped us out and gave us a lot of knowledge here. And we'll be recording this for everyone on the call, and we'll be distributing this out in our next newsletter as well. So thank you so much. Appreciate your time.

Thank you so much, Mike, and all the listeners.

All right, bye-bye.

Thank you. Bye.